The report cards from last year for Lotte Wellfood and Lotte Chilsung Beverage, which lead Lotte Group's food business, diverged. Lotte Wellfood recorded all-time high sales and stayed in the "4 trillion won club," but Lotte Chilsung Beverage fell out of the 4 trillion won sales range after a year due to sluggish domestic demand.
However, operating profit fell at both companies from a year earlier as they could not avoid the impact of cost pressures and slowing consumption. Both aim to improve profitability this year by using global markets as a breakthrough.
According to the Financial Supervisory Service's electronic disclosure system on the 10th, Lotte Wellfood's sales on a consolidation basis last year were 4.216 trillion won, up 4.2% from a year earlier. It is the largest sales on record. In contrast, annual operating profit was 109.5 billion won, down 30.3% year over year. Lotte Wellfood cited rising materials and supplies prices and one-off expense burdens as reasons for the deterioration in profitability. A Lotte Wellfood official said, "Despite continuous management efficiency efforts, we were affected by materials and supplies and one-off expense burdens," adding, "The cocoa price surge that began in 2024 continued through last year, reducing profit."
Lotte Wellfood is sensitive to cocoa price fluctuations because it has many product lines with a high proportion of chocolate ingredients, such as Pepero, Ghana, and Mon Cher. Cocoa prices had hovered in the mid-$2,000 per ton range for years, but they surged in 2023–2024 due to poor harvests in West Africa and other factors. By the end of 2024, cocoa futures hit a record high of $12,565 per ton.
Prices then entered a correction phase and fell to the $6,000–$7,000 per ton range last year, but they remain high compared with average years. The industry believes time lags due to inventory drawdowns and contract structures are inevitable before declines in materials and supplies prices are reflected in actual profits and losses.
Ha Hee-ji, an analyst at Hyundai Motor Securities, said, "Lotte Wellfood's profitability is expected to improve after high-cost inventories are cleared in the first half of this year," adding, "Results will improve thanks to price hikes at overseas subsidiaries and the stabilization of the ice cream plant in India." Park Sang-jun, an analyst at Kiwoom Securities, said, "Global cocoa prices turned lower year over year starting in the fourth quarter of last year, and a full-fledged decline in input costs is expected from April this year."
Lotte Chilsung Beverage's sales on a consolidation basis last year were 3.9711 trillion won, down 1.3% from a year earlier. Operating profit also fell 9.6% to 167.2 billion won. After surpassing 3 trillion won in annual sales for the first time in 2023 and topping 4 trillion won in 2024, it slipped back to the 3 trillion won range last year.
A Lotte Chilsung official said, "Overall beverage and liquor sales decreased, reducing sales from a year earlier, due to uncertain external conditions, a prolonged economic downturn, sluggish domestic demand, increased weather volatility, and the contraction of major sales channels." The company said the simultaneous contraction of domestic beverage and liquor businesses weighed on both scale and profitability.
Lotte Chilsung unveiled a "corporate value enhancement strategy" in 2024, setting goals of achieving 5.5 trillion won in sales and expanding the overseas share to 45% by 2028. To that end, it set 2025 targets of 4.31 trillion won in sales and 240 billion won in operating profit, but last year's results fell short.
◇ Discovering new export countries, expanding local production
Both companies are accelerating a shift in the revenue structure centered on overseas businesses to prepare for this year and beyond. Lotte Wellfood is strengthening its global strategy led by Pepero. Lotte Group Chairman Shin Dong-bin announced a strategy in 2024 to foster a "1 trillion won annual sales mega brand," designating Pepero as a core product.
Pepero's overseas sales last year totaled 87 billion won, up 24.1% from 70.1 billion won a year earlier. Lotte Wellfood plans to strengthen a "local production–local sales" system centered on India and Central Asia. Since July last year, it has operated a Pepero production line at its Haryana plant in India, aiming to reduce logistics and tariff burdens by expanding the proportion of local production. The industry expects this to serve as a bridgehead for global expansion by widening sales areas to parts of Southeast Asia, the Middle East, and Africa. The Pune ice cream plant is also being expanded in stages.
Lotte Chilsung Beverage is also looking overseas for a breakthrough. It is exporting "Milkis," "Let's Be," and "Aloe Juice" to the United States, Russia, Europe, and Southeast Asia, and plans to develop new countries and sales channels based on its flagship brands. It is also expanding halal products to target new markets in the Middle East and Southeast Asia.
In the liquor business, the company is strengthening overseas marketing centered on the fruit soju brand "Soonhari." Last year, in partnership with U.S. liquor distributor E&J Gallo, it expanded sales coverage in the United States to 48 states and about 24,000 retail locations. Lotte Chilsung plans to continue expanding both distribution networks and marketing this year to grow the scale of its overseas liquor business.
Kim Tae-hyun, an analyst at IBK Securities, said, "With consumer sentiment in the domestic market continuing to weaken, it will not be easy for Lotte Chilsung to recover sales in the short term," adding, "However, the effects of the profitability improvement project at the Philippine subsidiary, which has the largest sales scale, are continuing, so profitability is expected to improve."